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Wind in the US' sails

Offshore wind is taking off in America, offering growth opportunities for the usual renewable operators and a potential entry point for offshore oil specialists

Wind turbines jutting out of the sea are now a common sight from Europe's shores, where scores of projects have popped up over the past decade. But the technology has been much slower to take root in the US. That is starting to change. In December last year, the nation's first offshore wind project, Deepwater Wind's landmark 30 megawatt Block Island system off Rhode Island, started spinning its turbines and sending enough power to shore to supply around 17,000 households.

Many more offshore wind projects are in the pipeline, creating the potential for a multi-billion-dollar bonanza. In total, 28 projects totaling more than 24 gigawatts of generating capacity have been put forward, and of those 18 have advanced far enough to gain exclusive control over their proposed sites, according to US Department of Energy (DOE) data.

The timelines for many of these projects remain sketchy, at best, but the DOE has said as much as 3GW of offshore wind capacity could be built by the end of this decade and 22GW by 2030 is possible.

Some consider that forecast too ambitious considering the sector is in its infancy. Westwood Global Energy, a consultancy, says an increase of 2.5GW by 2026 and 5GW by 2030 is more likely, though that still sucks in $28bn for a sector that scarcely existed in the US a few years ago. Still, it's worth noting that the US doubled its onshore wind generating capacity from 2009 to 2016 alone, adding 40GW of capacity and bringing the total to 82GW, far outstripping forecasts ahead of the time.

Most of these projects have been proposed off the densely populated northeast coast (see map). Nearly 15GW of projects have been awarded off Massachusetts, Virginia, New Jersey and other northeastern states through competitive bid rounds held by the federal Bureau of Offshore Energy Management, the same body that holds offshore oil and gas licensing rounds. Major projects have also been proposed off Hawaii, California, the Gulf Coast and even in the Great Lakes, and more proposals will be drawn up.

Technical advances are helping to put wind in the sails of America's offshore sector. The development of larger and larger turbines is making offshore projects more competitive. Today's offshore turbines typically have a capacity of between 4MW and 5MW apiece, compared with around 2.5MW for typical onshore installations. This year, Vestas, a turbine builder, rolled out a turbine with 80-metre blades capable of turning out 9MW of power. By 2030, turbines capable of producing more than 11MW of power are likely to be spinning away offshore, where there are fewer constraints on height and blade size than at onshore farms. More powerful turbines should lower costs.

24 GW - Forecast wind generation capacity by 2030

Another important technological innovation is the move farther ashore and towards floating turbines. Much of the US' most enticing offshore wind opportunities, where the wind is strongest and most reliable, are in waters too deep for turbines to be fixed to the sea floor. Statoil, the offshore oil specialist, is building the world's first floating wind farm off Scotland using many of the tools and knowledge it gained developing deep-water oilfields. If successful, it could open up lucrative new frontiers for the offshore wind industry.

American project developers have also been encouraged by plummeting costs in Europe. Projects coming online this year in the UK are delivering power at close to $200 per megawatt hour, which would not be competitive in the US without steep subsidies. However, recent auctions across Europe have seen companies commit to delivering far cheaper energy from their offshore wind projects. The Dutch Borselle project will deliver power at $81/MWh starting in 2023, and the German He Dreiht and Borkum projects won auctions by committing to supply power at $70/MWh hour in 2025.

Not everyone is convinced. NextEra Energy, which operates wind, solar and nuclear facilities across the US, says onshore wind will be the cheapest source of energy by 2020 and that is where the focus should remain. It also claims more expensive offshore wind is a bad deal for consumers.

Then there is the occupant of the White House. President Donald Trump famously got into a tiff with the Scottish government over a wind farm that he complained would mar the view from one of his golf courses. The spat seems to have permanently put him off offshore wind farms and he is clearly still no fan of renewable energy or broader efforts to combat climate change, having pulled out of the Paris climate accord.

Still, opposition from Washington DC isn't likely to slow offshore wind growth. On top of the technical and cost improvements, there is strong local and state support for offshore wind. It will help that coastal states see offshore wind as an increasingly important part of the portfolio of tools to reduce emissions.

Source: Petroleum Economist
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